Internet Commerce Virtual Warehouse

Posted by arlene

One promise of the Internet is that small and medium-sized enterprises can look like larger companies. How can this be achieved in the area of inventory management? One idea is the virtual warehouse.

The idea of the virtual warehouse is simple. A small or medium-sized enterprise places a portion of its inventory under the management of the virtual warehouse, which can then make commitments to customers against that allocation. Consider the following sequence of events.

A small seller of widgets creates a Web-based catalog. Because the market for widgets depends on immediate gratification of buyers, it is important to ensure availability.

Each business day, the seller uses an administrative Web application to grant control of a certain number of widgets, perhaps 50, to the virtual warehouse.

When a buyer browses the widget catalog, the catalog system uses a real-time query to the virtual warehouse to obtain the number of widgets on hand. The catalog uses the quantity obtained to control its behavior, selecting regular or promotional pricing.

When a buyer selects a widget for purchase, the catalog system obtains a reservation against inventory from the virtual warehouse. The reservation is good for a fixed time, such as 30 minutes. This is similar to the way airline reservations work. The reservation is good for a fixed time, and lapses if the tickets are not paid for before the reservation expires.

When the transaction commits before the reservation expires, the Internet commerce transaction system records that fact with the virtual warehouse, confirming the reservation and removing the appropriate widget count from the allocation.

During the day, the seller can add or remove inventory from the virtual warehouse, although inventory cannot be removed if held by an active reservation.

In this way, a small enterprise can obtain the benefits of a fully integrated inventory management system without great expense. The virtual warehouse is merely a debit, credit, and reservation system for paper inventory, but the customer is happy because delivery is guaranteed.

The virtual warehouse breaks down only at the margins: if not all inventory is entered in the virtual warehouse, then some customers may not be able to order when in fact supply is available. However, the system never promises delivery to a customer when inventory is not available. A logical diagram of the virtual warehouse is shown in Figure 18-6. The virtual warehouse is built around a database that stores items, inventory, and reservations. Around that database are the applications that interact with it on behalf of catalog systems, transaction systems, merchants, ERP systems, and administrators.

• Catalog Interfaces

The catalog system can query the inventory status of items in the virtual warehouse and can place temporary reservations against inventory. Queries are used by the catalog software to gauge supply levels in order to select an appropriate presentation in the catalog. The catalog system places a reservation when a buyer selects an item for purchase, such as by putting it into a shopping cart or order form, but the order is not yet confirmed.

• Transaction Interfaces

The transaction system, during order processing, checks to see if valid reservations are held for all items being ordered. If they are, then the reservations are confirmed as a component of committing the order. When this happens, the virtual warehouse debits the inventory level.

• Merchant Interfaces

Small and medium-sized merchants will interact with the virtual warehouse through Web-based interfaces. The merchant can query inventory levels, generate reports, and, most importantly, allocate new inventory to the warehouse.

• Enterprise Resource Planning Interfaces

Large businesses will interact with the virtual warehouse through interfaces with their ERP systems. These systems run the business and have the ability to query, allocate, and commit changes to inventory as a result of external transactions.

• Administrative Interfaces

In order to make the virtual warehouse work in a shared-services environment across a public network, administrative utilities are necessary to set up new merchant accounts, control security parameters, and report on activity.

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